the effect of georgia’s hope scholarship … effect of georgia’s hope scholarship on college...

THE EFFECT OF GEORGIA’S HOPE SCHOLARSHIP ON COLLEGE

MAJOR: A FOCUS ON STEM*

David L. Sjoquist

Andrew Young School of Policy Studies

Georgia State University

John V. Winters (Corresponding author)

Department of Economics

Oklahoma State University and IZA

[email protected]

Abstract

There is growing concern in the U.S. that the nation is producing too few college graduates in

science, technology, engineering, and mathematics (STEM) fields and there is a desire to

understand how various policies affect college major decisions. This paper uses student

administrative records from the University System of Georgia to examine whether Georgia’s

HOPE Scholarship has affected students’ college major decisions, with a focus on STEM majors.

We find consistent evidence that HOPE reduced the likelihood that a USG student earned a

degree with a major in a STEM field. We discuss and test a number of explanations for why this

occurred.

JEL Codes: I23, J24

Keywords: merit aid; HOPE Scholarship; college major; STEM

* We thank Rob Watts from the Georgia Board of Regents for his assistance in providing data,

Lakshmi Pandey for technical assistance, and Julie Cullen, Bill Even, Barry Hirsch, Larry Katz,

and seminar participants at Miami University for helpful comments. The data from the

University System of Georgia were provided under a confidential agreement, and thus we cannot

make them available; researchers interested in acquiring these data should contact the Georgia

Board of Regents.

1

I. Introduction

State merit aid programs have grown substantially since the early 1990s, with Georgia’s

HOPE Scholarship program adopted in 1993 being among the largest and most notable. A large

research literature has emerged that examines the various effects of these merit aid programs on

college outcomes such as enrollment, persistence, completion, and post-college retention in the

state. One outcome receiving limited attention thus far is the effect of merit aid on college major

decisions.1

This paper examines the effect of Georgia’s HOPE Scholarship program on students’

college major choices using administrative records from the University System of Georgia. We

focus on the effects of HOPE on degrees in the fields of science, technology, engineering, and

mathematics (STEM).

Understanding how college majors are affected by merit-based financial aid is important

for two main reasons. First, an individual’s college major has a substantial impact on post-

college earnings and STEM graduates have considerably higher average earnings than non-

STEM graduates (Arcidiacono 2004; Sjoquist and Winters 2013). Second, researchers and

policymakers are concerned that the U.S. is producing too few college graduates majoring in

STEM fields (National Academies 2010). STEM fields are widely considered to be important

drivers of technological innovation (Atkinson and Mayo 2010). If the nation produces too few

STEM graduates, it could reduce U.S. international competitiveness, constrain long run

economic growth, and reduce individual well-being. Furthermore, particularly states may

experience especially severe STEM shortages that hinder their economic development efforts.

Understanding how education policies, such as Georgia’s HOPE Scholarship, affect student

1 In a related paper, Sjoquist and Winters (2013) use American Community Survey microdata to examine the

average effects of merit aid programs across 25 states adopting them since 1991. The analysis focuses on nine states

with relatively large and generous merit aid programs, and they find that the merit programs in these states

substantially reduced the likelihood that an individual earned a degree in a STEM field. The current paper and

Sjoquist and Winters (2013) were initially one paper but have been separated into two papers.

2

decisions to major in STEM fields has important consequences for individual states and the

nation.

We identified only two other studies that examined the effects of state merit aid programs

on college majors. Cornwell, Lee, and Mustard (2008) investigate the effect of Georgia’s HOPE

Scholarship on the college major choices of freshmen enrolled at the University of Georgia.

They find that HOPE significantly increased the probability of majoring in education but find no

significant effect of HOPE on other majors. Our administrative data includes all 35 public

colleges and universities in Georgia, not just one university as with Cornwell, Lee, and Mustard

(2008). Furthermore, we consider both freshman major and the major upon graduation.

Zhang (2011) examines the effects of merit aid programs in Florida and Georgia on

annual statewide STEM degree conferrals computed from the Integrated Postsecondary

Education Data System’s (IPEDS) Completion Survey. He generally finds statistically

insignificant effects of merit aid on the percentage of STEM graduate in each state, with the one

exception being a 1.6 percentage point increase for Florida private institutions. However, merit

aid programs likely affect where students attend college and have been shown to increase the

average academic ability of students in the state. STEM fields require greater academic ability,

especially in math, so merit-induced increases in average student quality need to be accounted

for, but using aggregate data prevents Zhang from doing so.

We examine the effects of Georgia’s HOPE Scholarship on students’ college major

decisions, focusing specifically on whether they major in STEM fields, using administrative data

for the University System of Georgia (USG). Our analysis accounts for merit-aid induced

changes in student academic quality by directly controlling for SAT scores and high school

attended, as well as sex, race, and ethnicity.

3

To preview our results, we find consistent evidence that Georgia’s HOPE Scholarship

reduced the probability that a young person would complete a bachelor’s degree with a major in

a STEM field. Our baseline specification yields an estimate of a 12.9 percent decrease in the

number of STEM graduates, with the effects being larger for males than females. The USG data

include detailed student information that allows us to take a closer look at which students are

shifting away from STEM. We estimated the effect by ability and found that the relative effects

were most pronounced for students with good but unexceptional math skills. Our data do not

allow us to identify the exact mechanisms driving the negative results, but we do offer some

important insights. The decrease in STEM degrees in Georgia appears to be driven largely by

the decreased likelihood that initial STEM majors actually go on to earn a STEM degree; HOPE

did not significantly affect the likelihood that a student chooses STEM as their initial major.

However, HOPE did affect enrollment decisions and appears to have caused a given quality

student to enroll in an institution in which they are less likely to earn a STEM degree. We also

find evidence that HOPE encouraged students to take actions to increase their GPAs in order to

retain HOPE.

II. Data and Empirical Framework

We explore the effects of the Georgia HOPE Scholarship on college major using

administrative data for the University System of Georgia (USG). The USG is a statewide system

that at the time consisted of 35 public higher education institutions including two- and four-year

colleges and universities in Georgia. From the USG Board of Regents we obtained data on four

cohorts of entering students to the USG. The four cohorts include all students who graduated

from a Georgia high school during the years 1990, 1991, 1995 and 1996 and enrolled in a USG

4

institution in the same year (i.e., students who enrolled in the summer or fall terms immediately

after graduating high school). Data were obtained for the 1995 and 1996 cohorts instead of the

1993 and 1994 cohorts because these first two post-HOPE cohorts were initially subject to an

income cap for eligibility. The 1992 cohort of students was avoided out of concern that some of

these students might have anticipated the passage of HOPE and altered their behavior in

response. The 1990-1991 cohorts are therefore the pre-HOPE control group and the 1995-1996

cohorts are the post-HOPE treatment group.

The USG sample is also restricted to Georgia residents who graduated high school in

Georgia because non-residents and graduates of schools outside of Georgia were not eligible for

HOPE. Of particular importance, we know the major declared as a freshman and the earned

major upon graduation. We first consider the effect of HOPE on majoring in a STEM field, and

then consider the effects on other broad majors. Descriptive statistics are present in Table 1.

We estimate a linear probability model as follows:

( ) ,

where Y is an indicator variable equal to one if the individual’s major is in a STEM field,

includes dummy variables for sex, race, Hispanic origin, high school attended, SAT score, and

high school GPA, and is a dummy equal to one for the 1995-96 cohorts and zero for

the 1990-91 cohorts.2 Therefore, measures the effect of the HOPE program on the probability

of being a STEM major holding student quality and demographics constant. We consider both

the major at time of matriculation (initial major) and the final major (earned major) for students

2 Note that the dummy equals one for all students in the post-HOPE cohort and not just students who

received the HOPE Scholarship. We do not have the HOPE GPA needed to determine if pre-HOPE students would

have qualified for HOPE had it existed. However, 86 percent of our post-HOPE sample of graduates received

HOPE as freshmen as did 92 percent of post-HOPE graduates with initial STEM majors, so the post-HOPE dummy

is a reasonably good approximation for HOPE receipt. We also considered an event-style analysis by replacing the

post-hope dummy with three dummies for matriculation year. Results, reported in Appendix Table A, are

qualitatively similar to using the simple post-HOPE dummy.

5

who obtained a 4-year degree. Sjoquist and Winters (2012b) use the same preferred

specification and confirm that there was no significant effect on degree completion in our USG

dataset.

III. Empirical Results

III.A. Initial STEM Major

We consider both initial majors and earned majors. Columns 1-4 of Table 2 presents the

results for the USG analysis in which the dependent variable is whether a student initially

declared a STEM major as a freshman. The first column includes dummies for sex, race,

Hispanic origin, and high school attended, but not SAT, high school GPA, or institution. The

second column adds SAT dummies, the third adds high school GPA dummies, and the fourth

adds dummies for initial USG institution attended. There are important caveats for the last two

columns. Sjoquist and Winters (2012a) argue that HOPE caused high school grade inflation for

post-HOPE cohorts in Georgia. Inflated high school GPAs for post-HOPE students mean that

one should be cautious interpreting results that control for high school GPA because looking at

students with the same GPA compares lower quality post-HOPE students to higher quality pre-

HOPE students.3 Since student quality is positively correlated with the probability of majoring

in a STEM field, grade inflation will create a negative bias in when controlling for high school

GPA. Furthermore, HOPE likely changed which institution students attend and this may affect

their majors. Our primary interest is in the overall effects of HOPE, but controlling for HOPE-

induced changes in institution may partial out some of the effect. Our preferred estimates,

therefore, do not control for high school GPA or institution, but we also report results that do.

3 Castleman (2012) also finds that students in Florida take strategic actions to help ensure that their high school

GPAs and SAT/ACT scores are above the cutoffs.

6

SAT score increases are likely to represent actual increases in student quality and should be

controlled for, so our preferred specification is the second column that includes all of the controls

except for high school GPA and institution.4

The results in the first column suggest that the HOPE Scholarship program increased the

probability of declaring a STEM major as a freshman. The second column in which we control

for student quality by adding the SAT score dummies results in a very small negative coefficient

that is statistically insignificant. When we add the high school GPA dummies in the third

column, the coefficient estimates increase in magnitude (i.e., become larger negatively) and

become statistically significant. Adding institution dummies (column 4) turns the coefficient

positive, and though relatively small it is statistically significantly. However, there are only 4

cohorts so the clustered standard errors should be interpreted with caution. The Conley-Taber

procedure is not feasible since we have administrative data for only one state. The results for our

preferred specification in column 2 suggest that controlling for changes in student quality using

SAT scores HOPE had no meaningful effect on the likelihood that freshmen declared a STEM

major.5

III.B. Earned STEM Major

Columns 5-8 of Table 2 report the effects of HOPE on the probability of earning a

bachelor’s degree in a STEM field. The coefficient on the post-HOPE dummy is statistically

insignificant in column 5, but the effect is significantly negative for all regressions in columns 6-

4 Note that the SAT is not part of the HOPE eligibility condition and thus not subject to merit-induced strategic

manipulation. 5 One limitation of the analysis using the initial major is that a very large percentage of students, almost 40 percent,

do not have a declared major. This is much larger than the 19.9 percent reported by Stater (2011) for the three

universities in Colorado, Indiana, and Oregon (1994-1996) and 29.5 percent reported by Carruthers and Ӧzek (2012)

for 4-year schools in Tennessee.

7

8. For our preferred regression in column 6, the coefficient of -0.0253 implies that HOPE

reduced the number of STEM graduates by 12.9 percent. Controlling for high school GPA again

decreases the coefficient. Controlling for institution again makes the coefficient smaller (i.e.,

less negative).6

While our preferred results do not control for institution (or high school GPA), the

change in the coefficients from doing so offers important insights into why HOPE decreased

STEM degrees. The increased coefficient on post-HOPE when controlling for institution could

be due to differences across colleges in the effect of HOPE on STEM majors; for example, it

could be that maintaining a 3.0 GPA could be easier at some colleges so that fewer students shift

to other majors in order to maintain the HOPE Scholarship or that some colleges provide more

intensive advising, which increases the attachment to the field for initial STEM majors, so that

fewer students switch major as a result of HOPE. But the effect could also be due to changes in

the pattern of colleges attended. HOPE enticed many of the state’s “best and brightest” high

school graduates to stay in-state (Dynarski 2000), which appears to have increased admission

standards at institutions like the Georgia Institute of Technology (Georgia Tech).7 This could

have led to increased competition for grades or increased demands that faculty place on students

in courses, leading to reduced STEM majors. HOPE-induced increased competitiveness appears

6 Another possible control group would be non-resident USG students. However, non-residents are an imperfect

control group since HOPE could have created a variety of spillover effects onto non-residents, including changes in

the composition of such students. Nevertheless, it is interesting that there was a substantial increase in the

percentage of all USG non-resident students who earned a STEM major (44.9 percent pre-HOPE to 49.8 percent

post-HOPE), as well as a similar increase in just the research institutions (57.4 percent pre-HOPE to 62.0 percent

post-HOPE). 7 Cornwell and Mustard (2006) note that over the period 1990 to 2003 average SAT scores for Georgia college

freshmen increase significantly more than the average for either U.S. or Georgia high school seniors. Average SAT

math scores for in-state students increased between our pre and post-HOPE periods by 24 points at Georgia Tech

and by 29 points at the University of Georgia, but by only 5 points for all other schools. The share of USG students

with high SAT math scores that enrolled at Georgia Tech decreased over the period; 29.3 percent of students with

SAT math scores between 600 and 800 attended Georgia Tech in the pre-HOPE period, but only 22.2 percent in the

post-HOPE period. One indication of the increased admission standards at Georgia Tech is that the freshman

acceptance rate fell from 69 percent in 1990 to 56 percent in 1996 (Office of Institutional Research and Planning

1990, 1996).

8

to have pushed more moderate ability students out to institutions at which majoring in STEM is

less appealing, perhaps because these schools do not offer engineering majors or have weaker

science programs. Alternatively, moderate ability students may have expected to be unable to

keep a 3.0 GPA at Georgia Tech and decided to enroll at less competitive institutions to increase

their chances of keeping the HOPE Scholarship. However, because other institutions are not as

heavily focused on STEM fields as is Georgia Tech, students shifting away from Georgia Tech

are also more likely to shift away from STEM majors. (See Section V.D for analysis by type of

college.)

The pattern of coefficients by sex is also of interest. The coefficient for males is

considerably larger than that for females and the difference is statistically significant in columns

6-8. In column 6 the coefficient for males is -0.0416, while the coefficient for females is only

-0.0121. The larger decrease for men is partially attributable to their higher prevalence in STEM

fields, but the relative magnitude for men is even greater than would be expected based on

relative means. We also explored the effect of HOPE on subfields within STEM and found that

the results reported above are not being driven by a particular subfield.

III.C. Changing Majors

Our preferred specification in Table 2 suggests that the HOPE Scholarship did not affect

the initial choice of a STEM major, but did negatively affect the probability of earning a STEM

degree. We explore the relationship between the initial major and the earned major, considering

just two categories of majors, STEM and non-STEM. The upper panel of Table 3 is a simple

crosstab between initial major and earned major, while the second panel shows for each of the

two initial majors the fraction of students with earned degrees with STEM and non-STEM

9

majors. (Table 3 considers only students who earned a college degree.) Note that 13.7 percent

of students with an undeclared initial major earned a STEM degree, while only 8.4 percent of

students who declared a non-STEM major as a freshman earned a degree with a STEM major. In

other words, few students switched into a STEM major during their college career. On the other

hand, 57.4 percent of students with an initial STEM major actually earned a STEM degree, so

that 42.6 percent of freshmen STEM majors switched to another major before they graduated.8

Given this pattern it is of interest to consider the effect of the HOPE Scholarship on the

student’s earned major given the student’s initial major (Table 4). Column 1 of Table 4

reproduces column 6 from Table 2, and is presented for convenience. Column 2 considers

students who declared a STEM major as a freshman. The results imply, as we would expect, that

the HOPE Scholarship caused a reduction in the percentage of initial STEM majors who earned a

degree in a STEM field. The coefficients are statistically significant for the entire sample as well

as for females and males. The magnitude of the effect of the HOPE Scholarship is larger for

initial STEM majors than for the entire sample (column 1), and is larger for males than females.

Columns 3 and 4 examine the effects of HOPE on earning a STEM degree for students

with an initial non-STEM major and with an initial undeclared major. For these two groups, the

coefficient estimates are negative for the total population as well as for females and males

separately, but the coefficients are much smaller in magnitude than for initial STEM majors and

they are not statistically significant. Thus, the negative effect of HOPE on STEM degree

production is primarily driven by initial STEM majors deciding not to complete degrees in

STEM fields. HOPE is somehow causing additional initial STEM majors to switch away from

STEM at some point before they graduate.

8 See Stinebrickner and Stinebrickner (forthcoming) for an analysis of the attrition of STEM majors. They focus on

the effect of changes in students’ beliefs about their likely grade point average as STEM majors as the students take

STEM courses.

10

III.D. Type of College

The University System consists of both 2-year and 4-year schools. One might expect that

the effect of merit aid would differ between 2-year and 4-year colleges, perhaps because of

differences in the type of students who enroll in the two types of schools, so we consider 2-year

and 4-year colleges separately. Similarly, there are three large research universities, Georgia

Institute of Technology, Georgia State University, and the University of Georgia. Given that the

culture and other characteristics of large research universities might differ from smaller 4-year

colleges, we explore whether there are differences in the effect of HOPE on STEM majors

between 4-year non-research colleges and the three research universities. In addition, the

Georgia Institute of Technology is the primary engineering school in the University System of

Georgia; Georgia Tech accounted for 32.6 percent of STEM degrees in the sample. Given the

difference in the environment in an engineering college, we consider the effect of HOPE on

STEM majors at Georgia Tech. We assign the student to the school at which they initially

enrolled and use the control variables in our preferred specification.

Table 5 considers the effect of HOPE on the probability of earning a STEM degree by

type of school. The results for all schools and for just 4-year schools are very similar, and in

particular the effect of HOPE is negative. For 4-year non-research schools, the three research

universities and for Georgia Tech, the coefficients for HOPE for all students and for males are

negative and statistically significant, but the magnitude of the effect is much larger for Georgia

Tech and somewhat larger for the research universities than for the 4-year non-research schools.

The coefficient for females is statistically insignificant in column 3, but negative and statistically

11

significant in columns 4 and 5. It thus appears that the effect of HOPE on the probability of

being a STEM major is greater at research universities and technology schools in particular.9

III.E. STEM Persistence by SAT and GPA

There is a substantial literature that attempts to explain the choice of a STEM major and

the lack of persistence in earning a degree with a STEM major. The research reports that

students with stronger academic ability as measured, for example, by SAT scores or initial

grades in STEM courses, are more likely to initially major in a STEM field and to persist (Ost

[2010]; Rask [2010]). Here we consider the effect of HOPE on earned STEM degrees for initial

STEM majors by SAT math score and by college GPA using our preferred specification. We

measure GPA after one year of college (that is, after 45 quarter credit hours).

Table 6 presents the results by SAT math score10

; for each panel, the first row is the

coefficient on the post-HOPE dummy, the second row in parentheses is the standard error, the

third row in brackets is the fraction of students in the SAT category with an initial STEM major

who earn a STEM degree in the pre-HOPE period11

, and the fourth row in braces is the implied

percentage change in STEM degrees, that is, row one divided by row three. The coefficients on

the post-HOPE dummy are generally negative and are statistically significant for higher SAT

math scores. HOPE reduced the probability that an initial STEM major would have an earned

STEM degree, and the percentage of initial STEM major students who fail to get a STEM degree

due to HOPE is smaller for higher SAT score students. This is not unexpected given existing

9 This is even despite the evidence presented above that Georgia Tech increased admission standards and is

consistent with arguments that Georgia Tech may have increased grading standards in STEM fields. 10

A few individuals do not have SAT scores. Examination of their GPAs shows that they are on average low

performing students, so we include them in the lowest SAT group. 11

Though not the focus of our study, the simple means are consistent with previous literature suggesting that STEM

persistence rates increase with student ability and are generally lower for women than men.

12

research that finds that students with higher SAT scores are more likely to initially major in

STEM and are more likely to persist and earn a STEM degree. Thus, we expect these students to

be less influenced by HOPE. However, while we observe the same pattern for males, for

females the relationship is reversed, with the larger percentage change being for females with

high SAT math scores.12

It should be of concern for policymakers that HOPE appears to reduce

the probability of earning a STEM degree even for students with high SAT math scores.

The results by first-year GPA (for initial STEM majors) are presented in Table 7, which

parallels the format of Table 6. The coefficients are negative, with one exception, but less than

half are statistically significant. There is no consistent pattern in the size of the coefficients on

HOPE or the percentage change in the number of students who fail to earn a STEM degree

because of HOPE. The results suggest that the HOPE Scholarship reduced the probability of an

earned STEM major regardless of first-year GPA, and that in general the magnitude of the effect

does not depend on the first-year GPA. Cornwell, Lee, and Mustard (2005, 2008) suggest that

the requirement that students maintain a 3.0 GPA in order to retain eligibility for a HOPE

Scholarship causes students to engage in strategic behavior, such as taking lighter course loads

and changing majors if the student is close to a 3.0 GPA. We do not find a larger effect of

HOPE for students with a first-year GPA near 3.0, but some students may have already changed

majors and others may have padded their first year schedule with easier courses. As Ost (2010)

reports, grades both push students away from a major and pull them towards a major, and since

first year grades are not necessarily in STEM courses, the effect by grade may reflect the pull of

grades into non-STEM fields.

12

The large magnitude for females with high SAT math scores was not expected. One possible explanation is that

this effect could be caused by an increase in female students at Georgia Tech, which as Table 5 shows had a larger

effect on STEM majors. However, the increase in the percentage of female students at Georgia Tech pre- and post-

HOPE was no larger than that experienced in the rest of the USG. Furthermore, the number of females with 700 or

better SAT-Math scores is relatively small, so the coefficient is not precisely estimated.

13

A further difficulty with using first year GPAs is that it appears that HOPE led to an

increase in grades. Table 8 explores how the post-HOPE dummy affected students’ first year

GPAs, by category of majors. In general, the results imply that the HOPE Scholarship program

increased students’ GPAs, but the effects for initial STEM majors who earn STEM degrees are

smaller than the effects for initial STEM majors earning degrees in other fields. This suggests

that many of the latter group may have already begun taking a non-STEM curriculum. These

results are consistent with the suggestion that students take action to improve their grades in an

attempt to meet HOPE’s 3.0 GPA renewal requirement. Because college GPA is subject to

various forms of manipulation, it cannot be viewed as an exogenous measure of student ability

for our analysis.

III.F. Non-STEM Majors

Table 9 considers the effect of HOPE on earned non-STEM majors; the upper panel

considers all students while the lower panel considers just initial STEM majors. For the full

sample, HOPE appears to cause an increase in the probability of majoring in business and in

health and a decrease in education and social science majors. The coefficient on the post-HOPE

dummy for liberal arts majors is positive but statistically insignificant. There are differences in

the pattern by gender. The large shift toward business is somewhat surprising given mechanisms

suggested by Stater (2011) and Rothstein and Rouse (2011) that financial aid is expected to shift

students away from high paying majors like business.

The bottom panel of Table 9 contains results using just those students who declared a

STEM major as a freshman. Table 9 suggests that initial STEM majors who changed major

shifted into business and liberal arts, although there are differences in the patterns by gender.

14

Cornwell, Lee and Mustard (2008), using data from the University of Georgia, find that

HOPE led to an increase in the probability of an initial education major. This leads to an

expectation that merit-aid programs would also increase the probability of an earned major in

education, but we find that merit aid reduces the probability of an earned major in education. To

explore this conflict in results, we redid our analysis using just data for the University of Georgia

and find that HOPE had no effect on the probability of an earned major in education. Cornwell,

Lee, and Mustard (2008), however, consider only initial major. When we consider the initial

major for University of Georgia students, we obtain a positive, but statistically insignificant,

coefficient on HOPE that is similar in magnitude to that found by Cornwell, Lee, and Mustard.

Thus, there may have been a slight positive effect of HOPE on initial education majors for

students at the University of Georgia, but there appears to be no effect of HOPE on education

degrees conferred.

IV. Summary and Conclusions

State merit aid programs have grown significantly since the early 1990s, but these

programs could have unintended effects that harm the economic interests of the state and the

nation. In particular, merit programs may inadvertently cause students to choose different

college majors than they would have in the absence of merit aid. The U.S. has experienced

increasing concern that the nation is producing too few graduates with degrees in science,

technology, engineering, and mathematics (STEM) fields. STEM graduates play an important

role in creating new technologies that lead to new production processes and increased

productivity, and thus producing too few STEM graduates could have very harmful economic

effects for the nation and individual states.

15

This paper uses student records from the University System of Georgia (USG) to

examine whether Georgia’s HOPE Scholarship program altered students’ college major

decisions. We focus on the effects on STEM fields but also examine the effects on other majors.

We find significant evidence that HOPE reduced the likelihood that a young person earned a

degree in a STEM field. Our baseline specification gives a coefficient of -0.025, which

corresponds to a 12.9 percent decrease in the number of STEM graduates. We find that although

Georgia’s HOPE Scholarship reduced STEM degree completion, it did not affect the likelihood

that a student chose STEM as their initial major. Instead, HOPE appears to have caused some

students to change majors out of STEM fields at some point in their college career. Furthermore,

the decrease in STEM degrees was driven largely by the decrease in initial STEM majors

actually earning a STEM degree (not by fewer students switching into a STEM field) and by the

decrease in earned STEM degrees by students enrolled at the state’s research universities. The

decrease in STEM degrees also occurred throughout the ability distribution, but the relative

effects were most pronounced for students with good but unexceptional math skills.

Our finding that HOPE reduces the probability of earning a STEM degree could be

consistent with a number of possible mechanisms. We are unable to say conclusively which

mechanisms are driving the results, but we do offer some insights. First, Stater (2011) argues

that an increase in financial aid lowers the price of majors that offer current consumption

benefits and encourages student substitution toward such majors. Similarly, financial aid could

be viewed as a transitory income shock that could lead to more current consumption oriented

majors.13

Rothstein and Rouse (2011) suggest that student loan debt might affect a student’s

13

Riegle-Crumb et al. (2012), using the NELS and HS&B, find that an additional $10,000 of real family income

reduces the probability that a student will declare a physical science/engineering major by 0.2 to 0.5 percentage

points. However, $10,000 of permanent family income might have very different effects than transitory income

from student financial aid.

16

choice of college major and future occupation due to debt aversion and credit constraints.

Students who are debt averse may choose high earning majors and occupations to pay off debt

quickly after graduation. Post-graduation credit constraints may make it difficult to finance large

purchases like cars and houses, and individuals may pursue high earning majors and occupations

to make these more attainable. Financial aid should decrease student loan debt and may reduce

the importance of future earnings in college major decisions.

Cornwell, Lee, and Mustard (2008) suggest that the requirement that students maintain a

3.0 GPA to retain the Georgia HOPE Scholarship could encourage students to major in subjects

for which it is easier to maintain the required GPA.14

Similarly, high school GPA eligibility

requirements for merit scholarships may provide incentives for students to take easier courses in

high school, which could make them less prepared for more challenging majors in college;

alternatively, if merit programs increase student effort in high school, they could cause students

to be better prepared for college, which is consistent with the findings of Henry and Rubenstein

(2002) and Heller and Rogers (2003).

Previous researchers (Dynarski 2000; Cornwell, Mustard, and Sridhar 2006) find that

merit programs increase the likelihood that students stay in-state to attend college and affect the

type of in-state institution they attend, which could alter the college major options that are

available and alter the relative attractiveness of various majors. In particular, merit programs

increase the percentage of high ability students who stay in-state, which may make it harder for

more moderate ability students to obtain admission to the most selective institutions in the state,

which could affect these students’ choice of major. Furthermore, if grading is done on a relative

basis, merit-induced grade competition from better students may cause moderate ability students

14

Dee and Jackson (1999) find that students in science, engineering, and computing are substantially more likely to

lose the Georgia HOPE scholarship than students in other disciplines, but they do not consider the effects that this

might have on students’ major choices.

17

to earn lower grades in difficult majors and encourage them to switch to easier majors to stay in

college.15

Similarly, institutions experiencing increased enrollment due to merit aid may raise

standards in STEM fields to push lower ability students into other majors with lower

instructional costs.

STEM degrees pay relatively high salaries and the mechanisms posited by Stater (2011)

and Rothstein and Rouse (2011) suggest that financial aid causes students to shift away from

high paying majors, though it is unclear how large the expected effects should be. However,

business majors also have relatively high salaries and we do not see a shift away from business;

we actually see a strong shift toward business. Additionally, the Stater (2011) and Rothstein and

Rouse (2011) mechanisms would suggest a decrease in initial STEM majors, but we observe no

such decrease. So while we cannot rule out the Stater (2011) and Rothstein and Rouse (2011)

mechanisms, they seem unlikely to be the primary explanations for the relatively large decrease

in STEM degrees that we find.

Our analysis provides support for two other mechanisms. First, the results suggest that

HOPE induced students of a given academic ability to enroll in institutions that make them less

likely to earn a STEM degree. This appears to have resulted in part from merit-induced

increased selectivity at top universities like Georgia Tech, which pushed out many moderate

ability students. However, changes in students’ college enrollment decisions could also be

driven by another mechanism: students have incentives to alter their education plans in order to

keep a 3.0 GPA to retain the HOPE Scholarship. This could motivate some students to attend

less challenging institutions and major in less challenging fields. We find that HOPE caused

first-year GPAs to increase, which is consistent with students taking actions to improve their

15

Luppino and Sander (2012) and Arcidiacono, Aucejo, and Hotz (2013) report evidence of peer effects using data

from the University of California system. Attending a UC campus where the sciences are more competitive makes a

moderate ability student less likely to earn a science degree.

18

grades to try to meet HOPE’s 3.0 GPA renewal requirement. These actions likely included

changing majors away from STEM fields because STEM fields are on average more difficult

than other majors.

Without knowing more about the mechanism through which merit aid affects the choice

of major it is hard to provide firm policy recommendations short of eliminating merit aid. If

concern with obtaining the GPA necessary to maintain eligibility is the mechanism, there are

possible changes that could be made. The GPA used to determine continuing eligibility could be

based on courses that are not related to the major, or the GPA could be based on courses taken

beginning in the second year. If high school students avoid taking courses that prepare them to

be STEM majors in order to become merit aid eligible, allowing merit aid eligibility to be based

on SAT or ACT score could reduce that disincentive.

19

References

Arcidiacono, Peter (2004). “Ability Sorting and the Returns to College Major.” Journal of

Econometrics 121 (1-2): 343-375.

Arcidiacono, Peter, Esteban M. Aucejo, and V. Joseph Hotz (2013). “University Differences in

the Graduation of Minorities in STEM Fields: Evidence from California.” NBER

Working Paper No. 18799.

Atkinson, Robert D. and Merrilea Mayo (2010). Refueling the U.S. Innovation Economy: Fresh

Approaches to Science, Technology, Engineering and Mathematics (STEM) Education.

Information Technology and Innovation Foundation Report.

Carruthers, Celeste K. and Umut Ӧzek (2012). “Losing HOPE: Financial Aid and the Line

Between College and Work.” Working Paper, University of Tennessee.

Castleman, Benjamin L. (2012). “All or Nothing: The Impact of Partial vs. Full Merit

Scholarships on College Entry and Success.” Working Paper, Harvard University.

Cornwell, Christopher M., Kyung Hee Lee, and David B. Mustard (2005). “Student Responses to

Merit Scholarship Retention Rules.” Journal of Human Resources 40(4): 895-917.

Cornwell, Christopher M., Kyung Hee Lee, and David B. Mustard (2008). “The Effects of State-

Sponsored Merit Scholarships on Course Selection and Major Choice in College.”

Working Paper, University of Georgia.

Cornwell, Christopher, David B. Mustard, and Deepa Sridhar (2006). “The Enrollment Effects of

Merit-Based Financial Aid: Evidence from Georgia’s HOPE Program.” Journal of Labor

Economics 24(4): 761-86.

Dee, Thomas S. and Linda A. Jackson (1999). “Who Loses HOPE? Attrition from Georgia’s

College Scholarship Program.” Southern Economic Journal 66(2): 379-390.

Dynarski, Susan (2000). “Hope for Whom? Financial Aid for the Middle Class and Its Impact on

College Attendance.” National Tax Journal Part 2 53(3):629-61.

Henry, Gary T. and Ross Rubenstein (2002). “Paying for Grades: Impact of Merit-Based

Financial Aid on Educational Quality.” Journal of Policy Analysis and Management 21

(1): 93-109.

20

Luppino, Marc and Richard Sander (2012). “College Major Competitiveness and Attrition from

the Sciences.” Working Paper, Federal Trade Commission.

National Academies (2010). Rising Above the Gathering Storm: Rapidly Approaching Category

5: Revised. 2005 “Rising Above the Storm” Committee. Washington, DC: National

Academies Press.

Office of Institutional Research and Planning (1990, 1996). Georgia Tech Fact Book. The

Georgia Institute of Technology, Atlanta, Georgia.

Ost, Ben (2010). “The Role of Peers and Grades in Determining Major Persistence in the

Sciences.” Economics of Education Review, 29(6): 923-934.

Rask, Kevin (2010). “Attrition in STEM Fields at a Liberal Arts College: The Importance of

Grades and Pre-Collegiate Preferences.” Economics of Education Review, 29(6): 892-

900.

Riegle-Crumb, Catherine, Barbara King, Eric Grodsky, and Chandra Muller (2012). “The More

Things Change, the More They Stay the Same? Prior Achievement Fails to Explain

Gender Inequality in Entry Into STEM College Majors Over Time.” American

Educational Research Journal, 49(6): 1048-1073.

Rothstein, Jesse and Cecilia Rouse (2011). “Constrained After College: Student Loans and

Early-Career Occupational Choices.” Journal of Public Economics. 95(2011):149-163.

Sjoquist, David L., and John V. Winters (2012a). “The Effects of HOPE on Post-College

Retention in the Georgia Workforce” Regional Science and Urban Economics,

Forthcoming.

Sjoquist, David L., and John V. Winters (2012b). “State Merit-based Financial Aid Programs and

College Attainment.” IZA Discussion Paper No. 6801.

Sjoquist, David L., and John V. Winters (2013). “State Merit-Aid Programs and College Major:

A Focus on STEM.” IZA Discussion Paper No. 7381.

Stater, Mark (2011). “Financial Aid, Student Background, and the Choice of First-year College

Major.” Eastern Economic Journal 37(3): 321-343.

Stinebrickner, Todd R. and Ralph Stinebrickner (forthcoming). “A Major in Science? Initial

Beliefs and Final Outcomes for College Major and Dropout.” Review of Economic

Studies.

21

Zhang, Liang (2011). “Does Merit-Based Aid Affect Degree Production in STEM Fields:

Evidence From Georgia and Florida.” Journal of Higher Education, 82(4): 389-415.

22

Table 1: Summary Statistics for USG Data

All Graduates Females Males

Mean S.D. Mean S.D. Mean S.D.

STEM Major 0.197 0.398 0.128 0.334 0.289 0.453

Business Major 0.261 0.439 0.213 0.410 0.324 0.468

Education Major 0.153 0.360 0.216 0.412 0.068 0.252

Health Major 0.057 0.232 0.090 0.286 0.013 0.114

Liberal Arts Major 0.157 0.364 0.155 0.362 0.160 0.367

Social Science Major 0.175 0.380 0.198 0.398 0.145 0.352

Post-HOPE Dummy 0.540 0.498 0.554 0.497 0.521 0.500

SAT Math 518.4 92.8 498.9 85.8 544.3 95.4

SAT Verbal 520.7 90.0 513.0 88.5 530.9 91.0

High School GPA 3.037 0.620 3.092 0.600 2.963 0.639

Female 0.572 0.495 1.000 0.000 0.000 0.000

Black 0.182 0.386 0.224 0.417 0.126 0.332

Hispanic 0.010 0.102 0.010 0.099 0.011 0.105

Asian 0.029 0.167 0.026 0.159 0.033 0.177

Native American 0.002 0.039 0.001 0.038 0.002 0.040

Observations 42,399 24,263 18,136

23

Table 2: Effects of HOPE on Choosing a STEM Major

(1) (2) (3) (4) (5) (6) (7) (8)

Initial Major

Earned Major

A. Total 0.0231 -0.0048 -0.0201 0.0086

-0.0058 -0.0253 -0.0384 -0.0216

(0.0080)* (0.0059) (0.0042)** (0.0013)***

(0.0065) (0.0033)*** (0.0041)*** (0.0029)***

B. Females 0.0284 0.0074 -0.0046 0.0121

0.0041 -0.0121 -0.0240 -0.0128

(0.0043)*** (0.0051) (0.0038) (0.0033)**

(0.0050) (0.0048)* (0.0049)** (0.0023)**

C. Males 0.0181 -0.0182 -0.0343 0.0065

-0.0180 -0.0416 -0.0538 -0.0321

(0.0162) (0.0086) (0.0075)** (0.0024)*

(0.0096) (0.0025)*** (0.0029)*** (0.0039)***

Sex, Race/Ethnicity Dummies Yes Yes Yes Yes

Yes Yes Yes Yes

High School Dummies Yes Yes Yes Yes

Yes Yes Yes Yes

SAT Dummies No Yes Yes Yes

No Yes Yes Yes

High School GPA Dummies No No Yes Yes

No No Yes Yes

USG Institution Dummies No No No Yes No No No Yes

Standard errors in parentheses are clustered by high school graduation year.

*Significant at 10% based on small sample t-distribution; **Significant at 5%; ***Significant at 1%.

24

Table 3: Share of USG Graduates by Initial Major and Degree Major

Initial Major

Undeclared Non-STEM STEM Total

Degree Non-STEM 0.342 0.381 0.080 0.803

Major STEM 0.054 0.035 0.108 0.197

Total 0.397 0.416 0.188 1.000

Degree Non-STEM 0.863 0.916 0.426

Major STEM 0.137 0.084 0.574

Total 1.000 1.000 1.000

Note that Initial Major is the major the student declared as a freshman, while Degree Major

is the major that the student graduated with. The table includes only students who

completed college. The upper panel shows the distribution across all graduates, while the

second panel shows the allocation across Degree Major for each Initial Major.

25

Table 4: Effects of HOPE on Earning a STEM Degree by Initial Major

(1) (2) (3) (4)

Full Initial STEM Initial Non-STEM Initial Undeclared

Sample Majors Majors Majors

A. Total -0.0253 -0.0788 -0.0098 -0.0085

(0.0033)*** (0.0151)** (0.0075) (0.0044)

B. Females -0.0121 -0.0633 -0.0081 -0.0053

(0.0048)* (0.0163)** (0.0040) (0.0047)

C. Males -0.0416 -0.0937 -0.0110 -0.0138

(0.0025)*** (0.0252)** (0.0162) (0.0062)

Sex, Race, Ethnicity Yes Yes Yes Yes


SAT Dummies Yes Yes Yes Yes

High School GPA Dummies No No No No

USG Institution Dummies No No No No



26

Table 5: Effects of HOPE on Earning a STEM Degree by Students' Initial Institutions

(1) (2) (3) (4) (5)

Full

USG

4-Year

Schools

4-Year

Non-

Research

Research

Universities

Georgia

Tech

A. Total -0.0253 -0.0284 -0.0121 -0.0588 -0.0944

(0.0033)*** (0.0036)*** (0.0033)** (0.0084)*** (0.0152)***

B. Females -0.0121 -0.0145 0.0015 -0.0442 -0.1468

(0.0048)* (0.0048)* (0.0026) (0.0093)** (0.0045)***

C. Males -0.0416 -0.0455 -0.0331 -0.0679 -0.0762

(0.0025)*** (0.0027)*** (0.0061)** (0.0096)*** (0.0171)**

Sex, Race, Ethnicity Yes Yes Yes Yes Yes

High School Dummies Yes Yes Yes Yes Yes

SAT Dummies Yes Yes Yes Yes Yes

High School GPA Dummies No No No No No

USG Institution Dummies No No No No No



27

Table 6: Effects of HOPE on Earning a STEM Degree by SAT Math Score for Initial STEM Majors

(1) (2) (3) (4) (5)

SAT Math <400 400-499 500-599 600-699 700-800

A. Total -0.0295 -0.0052 -0.0678 -0.0805 -0.0585

(0.0280) (0.0176) (0.0141)** (0.0238)** (0.0168)**

[0.3438] [0.3680] [0.5539] [0.7307] [0.9020]

{-8.57%} {-1.41%} {-12.24%} {-11.02%} {-6.49%}

B. Females 0.0157 0.0262 -0.0321 -0.0594 -0.1134

(0.1091) (0.0312) (0.0056)** (0.0234)* (0.0588)

[0.2987] [0.2829] [0.4571] [0.6685] [0.9608]

{5.24%} {9.26%} {-7.02%} {-8.89%} {-11.80%}

C. Males -0.0128 -0.0691 -0.1169 -0.0824 -0.0409

(0.1790) (0.0621) (0.0278)** (0.0318)* (0.0240)

[0.4118] [0.4786] [0.6324] [0.7588] [0.8902]

{-3.11%} {-14.44%} {-18.49%} {-10.86%} {-4.59%}








28

Table 7: Effects of HOPE on Earning a STEM Degree by First-Year GPA for Initial STEM Majors

(1) (2) (3) (4) (5) (6)

Freshman GPA <2.50 2.50-2.79 2.80-2.99 3.00-3.19 3.20-3.49 3.50-4.00

A. Total -0.0718 -0.1449 -0.0632 -0.0878 -0.0321 -0.1027

(0.0322) (0.0281)** (0.0563) (0.0131)*** (0.0143) (0.0139)***

[0.4869] [0.6327] [0.6311] [0.6695] [0.7177] [0.8088]

{-14.75%} {-22.90%} {-10.01%} {-13.11%} {-4.47%} {-12.70%}

B. Females -0.0394 -0.1306 -0.1085 -0.1629 0.0411 -0.0704

(0.0456) (0.0820) (0.0826) (0.0726) (0.0417) (0.0141)**

[0.3559] [0.4656] [0.5278] [0.5577] [0.5724] [0.7238]

{-11.07%} {-28.05%} {-20.56%} {-29.21%} {7.18%} {-9.73%}

C. Males -0.0858 -0.1356 -0.0483 -0.0950 -0.1114 -0.1247

(0.0404) (0.0568)* (0.0658) (0.0148)*** (0.0308)** (0.0248)**

[0.5695] [0.7310] [0.7132] [0.7576] [0.8106] [0.8650]

{-15.07%} {-18.55%} {-6.77%} {-12.54%} {-13.74%} {-14.42%}

Sex, Race, Ethnicity Yes Yes Yes Yes Yes Yes

High School Dummies Yes Yes Yes Yes Yes Yes

SAT Dummies Yes Yes Yes Yes Yes Yes

High School GPA Dummies No No No No No No

USG Institution Dummies No No No No No No



29

Table 8: Effects of HOPE on First-Year GPA

(1) (2) (3) (4)

All

Graduates

Initial STEM

Majors

Initial STEM

Majors Earning

STEM Degrees

Initial STEM

Majors Earning

Non-STEM Degrees

A. Total 0.1793 0.1290 0.1229 0.1847

(0.0119)*** (0.0120)*** (0.0201)*** (0.0106)***

B. Females 0.1928 0.1467 0.1533 0.1672

(0.0118)*** (0.0247)*** (0.0345)** (0.0465)**

C. Males 0.1604 0.1074 0.0998 0.1823

(0.0146)*** (0.0129)*** (0.0272)** (0.0274)***

Sex, Race, Ethnicity Yes Yes Yes Yes


SAT Dummies Yes Yes Yes Yes

High School GPA Dummies No No No No

USG Institution Dummies No No No No



30

Table 9: HOPE Program Effects on Non-STEM Earned Majors

(1) (2) (3) (4) (5)

Business Education Health Liberal Arts

Social

Sciences

Full Sample:

A. Total 0.0494 -0.0282 0.0045 0.0101 -0.0105

(0.0025)*** (0.0037)*** (0.0017)* (0.0052) (0.0032)**

B. Females 0.0238 -0.0417 0.0094 0.0163 0.0042

(0.0043)** (0.0052)*** (0.0022)** (0.0040)** (0.0014)*

C. Males 0.0797 -0.0072 -0.0013 -0.0008 -0.0288

(0.0063)*** (0.0026)* (0.0009) (0.0068) (0.0062)**






Initial STEM Majors:

A. Total 0.0579 -0.0015 0.0079 0.0121 0.0024

(0.0138)** (0.0043) (0.0048) (0.0039)* (0.0038)

B. Females 0.0334 -0.0147 0.0134 0.0120 0.0192

(0.0160) (0.0071) (0.0156) (0.0015)*** (0.0106)

C. Males 0.0768 0.0061 0.0033 0.0099 -0.0024

(0.0222)** (0.0018)** (0.0011)* (0.0091) (0.0030)



31

Table A: USG Cohort Year Dummy Coefficients

Outcome: Initial STEM Major STEM Degree

A. Total Population

1991 Cohort Dummy 0.0044 0.0053

(0.0054) (0.0053)

1995 Cohort Dummy -0.0084 -0.0227

(0.0054) (0.0053)***

1996 Cohort Dummy 0.0032 -0.0222

(0.0053) (0.0053)***

B. Females

1991 Cohort Dummy -0.0028 0.0062

(0.0067) (0.0062)

1995 Cohort Dummy 0.0013 -0.0091

(0.0066) (0.0061)

1996 Cohort Dummy 0.0102 -0.0082

(0.0065) (0.0061)

C. Males

1991 Cohort Dummy 0.0130 0.0059

(0.0088) (0.0092)

1995 Cohort Dummy -0.0184 -0.0381

(0.0089)** (0.0094)***

1996 Cohort Dummy -0.0040 -0.0387

(0.0089) (0.0093)***

Note: 1990 is the omitted based year. Other specifications correspond to columns 2 and 6 of Table 2. OLS

Standard errors are in parentheses. **Significant at 5%; ***Significant at 1%.

the effect of georgia’s hope scholarship … effect of georgia’s hope scholarship on college...

Documents